In this post, we look at recent action in Sweden relating to a popular snowball candle holder and the principle of ‘fair adjustment’​ under the Directive on Copyright in the Digital Single Market (DSM Directive).

It was great to see UK newspapers once again covering the DSM Directive. The EU's Directive last captured the public's attention back in 2019, when various interested parties debated the merits of the so-called ‘press publisher’s levy’ and ‘upload filter’ provision (Articles 15 and 17). This time, attention has focussed on Article 20 (the so-called 'best seller’ provision) and it could have major ramifications for the anyone acquiring or granting intellectual property rights.

A Swedish sculptor, Ann Wolff, is credited by Kosta Boda AB as the designer of the snöbollen candle holder. After first being manufactured in 1973,  the pleasing shape (which Wolff describes as a "design that felt both warm and cold at the same time, a bit of yin and a bit of yang”) went on to be a ubiquitous presence in Swedish homes.

However, despite more than 15 million copies being sold, the creator has stated that she received a tiny proportion of profits as royalty payments. This is in no small part owing to Swedish law deeming that her copyright protection ended in the 1980s. Being both a skilled sculptor and evidently keeping a keen eye on developments in EU law, Ann Wolff went to Kosta Boda to negotiate back payments of EUR 1m for their use of her design.

Relevant law

As one of this post's authors has previously highlighted (in another life, before DLA Piper), the DSM Directive introduced the concept of ‘fair adjustment’. It was an element of this principle which formed the basis of Wolff's claim. In addition to Articles 18 ('proportionate remuneration'), 19 ('transparency'), 21 ('mandatory ADR for articles 19 and 20') and 22 (‘use it or lose it’), we have Article 20 - a contract adjustment mechanism for ‘best sellers’. Essentially, if a performer or artist is not contracted under a union or guild agreement and the products of their labours turns out to have rewarded them with disproportionately low pay when compared to the subsequent revenues of the company acquiring their rights, then the company will have to ‘top up’ the initial payment. 

Member States shall ensure that, in the absence of an applicable collective bargaining agreement providing for a mechanism comparable to that set out in this Article, authors and performers or their representatives are entitled to claim additional, appropriate and fair remuneration from the party with whom they entered into a contract for the exploitation of their rights, or from the successors in title of such party, when the remuneration originally agreed turns out to be disproportionately low compared to all the subsequent relevant revenues derived from the exploitation of the works or performances.

Member States were each tasked with implementing the DSM Directive into their own national laws (which, as a result of Brexit, the UK did not have to do).  Sweden elected to limit the applicability of Article 20 to agreements entered into on 1 January 2003 or later. As a result, Kosta Boda have refused to adjust Ann Wolff's agreement to compensate her for her disproportionately low pay (as her agreement was signed in the 1970s).

Why you should care

Whether you're in the business of selling copyright works or acquiring them, the implications of Article 20 are potentially massive. The DSM Directive is silent on whether its provisions should be retroactive, but should the Swedish Court (which is anticipated to refer the question to the CJEU) elect that it should have such effect: there would be a huge amount of potential claimants whose pay may be deemed “disproportionately low compared to all the subsequent relevant revenues derived from the exploitation of the works or performances”.

 We may also get clarity from the CJEU on what constitutes “disproportionately low” remuneration and, very interestingly, how the claim for “additional, appropriate and fair remuneration” should be calculated. For example, a film studio whose small budget flick goes on to be a worldwide gem may have to share the unexpected profits with the film's creative personnel and may need to accrue for such potential payments. 

The judgement may also shed light on whether ‘percentage share of future profits’ clauses and/or tiered additional payment clauses could be deemed to be too low (and so need topping up to be "fair remuneration"). This is likely to be an area of focus within the creative industries, made even keener as a result of obligations arising under Article 19. 

Article 19 was designed to give meaning to the other ‘fair adjustment’ provisions. It requires that an entity receiving rights (i.e. a licensee or assignee) should provide up-to-date and comprehensive information (including the type of exploitation and revenues received) to the authors and performers who have granted them rights to exploit on at least an annual basis. 

As ever with new EU law, we'll have to wait for a referral to test the parameters. Meaning that this case could end-up being as instructive as Deckmyn was for parody (Article 5(3)(k) of the InfoSoc Directive (2001/29/EC)) or as the new Belgian referral C-575/23 may be for Article 18 of the DSM Directive.

In the meantime, seeking to comply with the principles will be essential for anyone granting rights or acquiring rights under contracts subject to EU Member state's laws. This will undoubtedly include careful review of contracts and coordination with finance teams, or to ensure that EU agreements are updated to be governed by English law.

We'll keep you updated as the case progresses and feel free to contact Alex Lowe and Nick Fitzpatrick should you have any questions on the law as it stands.